The DFSA proposes changes to the DIFC Offers of Securities regime for non-DIFC Offers

Background and Rationale for Review

Currently, the DFSA's Markets Law requires that any Offer of Securities to the Public, whether made 'in' or 'from' the DIFC, necessitates an Approved Prospectus i.e. a Prospectus which is approved by the DFSA. An ‘Offer of Securities to the Public’ is defined as:

“a communication to any person in any form or by any means, presenting information on the terms of the offer and the Securities … offered, so as to enable an investor to decide to buy the Securities … or subscribe to those Securities…”.

Offerors (excluding those offering Units of a Fund) become Reporting Entities, subject to heightened obligations concerning corporate governance, market disclosures, financial reporting, and systems and controls. Furthermore, an Offeror making an offer 'from' the DIFC must notify the DFSA of any non-DIFC jurisdictions where the offer will be made and comply with the regulations in those jurisdictions.

The DFSA’s review of this regime was prompted by a notable increase in interest in utilising DIFC corporate structures to raise capital in markets outside the DIFC. This practice often results in Offerors facing dual regulatory requirements – those of the DIFC and those of the target market(s).

The DFSA's review was guided by its principles of using resources efficiently and ensuring the cost of regulation is proportionate to its benefits. The current framework is perceived as potentially imposing an undue regulatory burden due to the duplication of regulations, especially since local regulators in target jurisdictions are responsible for protecting investors within their territories.

A benchmarking exercise by the DFSA revealed that securities regulators in other prominent financial centres such as Singapore, Hong Kong, the ADGM, the EU, the UK, and the British Virgin Islands only regulate offers of securities made 'in' their respective jurisdictions. They rely on the regulatory frameworks of the target jurisdictions to govern offers made 'from' their financial centres into those external markets.

Proposed Changes to the DIFC Public Offers Regime

1. Offers of Securities to the Public 'from' the DIFC

The central proposal is the removal of Offers of Securities to the Public made 'from' the DIFC from the DFSA's regulatory perimeter. The DFSA’s rationale for this proposed change is summarised below:

• Alignment with benchmarking: This approach aligns the DIFC with international regulatory standards, whereby the onus of regulating an offer falls upon the securities regulator in the jurisdiction in which the offer is made.

• Proportionality and Efficiency: The proposed change aims to reduce the regulatory burden on Offerors who might otherwise face inconsistent or more onerous regulatory obligations when making public offers in the DIFC compared to other similar jurisdictions.

• Protection of DIFC Users: The DFSA believes this change will not cause harm to the financial services industry 'in' the DIFC, as the offers in question are not directed at DIFC investors. Assuming the changes are implemented, the existing DFSA requirements would continue to apply to offers made partially 'in' the DIFC.

In line with this primary proposal, the DFSA also proposes not to mandate specific disclaimers in its rules regarding its non-involvement in offers made 'from' the DIFC. Potential Offerors should note that the general prohibition against misconduct in the Regulatory Law would still apply to the Offeror. Therefore, care should be taken to ensure that offering materials used in target jurisdictions do not include information that could be construed as being misleading, deceptive, fraudulent or dishonest. Offerors should, therefore, consider whether to include appropriate disclaimers in offering materials to ensure compliance with this overarching obligation.

Several consequential changes would arise from this amendment, if made:

• The requirement for Offerors to notify the DFSA of non-DIFC jurisdictions into which an offer 'from' the DIFC is made would be removed.

• An Offer of Securities to the Public 'from' the DIFC would no longer trigger Reporting Entity status for the Offeror under the DFSA regime.

2. Disapplying non-DIFC Offers from the Financial Promotion Rules

The DFSA's General Module (GEN) contains rules relating to Financial Promotions. To prevent duplicative requirements, these rules do not currently apply to Offers of Securities ('in' or 'from' the DIFC) made in compliance with the Markets Law and related MKT Rules.

If Offers of Securities to the Public 'from' the DIFC are removed from the scope of the Markets Law and MKT Rules as proposed, the Financial Promotion Rules in GEN would, by default, become applicable to such offers.

To avoid this, the DFSA proposes to disapply the Financial Promotion Rules in GEN specifically in relation to Offers of Securities to the Public made 'from' the DIFC. This is consistent with the overarching proposal that such offers would no longer fall within the DFSA's regulatory perimeter.

Consultation and Next Steps

CP166 invites comments from the public and industry stakeholders on these proposals. The deadline for submitting comments is 16 June 2025.